Holger Zemanek: Bitte in dem anderne Paper die Anmerkungen von ...

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The empirical estimation is based on the theoretical framework as summarized in equation (9) and the discussion of section 3. The coefficient β 1 captures the impact of euro area traded goods prices on inflation, whereas β 2 measures the influence of exchange rate movements. To decompose overall relative productivity growth into domestically driven and capital inflow-induced productivity growth, we add an interaction term. 13 Multiplying the overall productivity differential ( qˆ − qˆ by the capital inflow proxy ˆ isolates what capital T NT ) i, t inflows add to domestically driven relative productivity growth ( k i, t β 4 ). The coefficient β 3 captures the productivity growth originating in domestic capital formation. The capital inflow proxy is added as a separate variable and isolates inflation which purely driven by capital inflows without being backed by productivity growth ( β 5 ). We use equation (15) for our panel estimation where t indicates the time index, while the index i refers to the respective country. γ i represents the country specific fixed effect to account for structural country differences and μ is the white noise error term: i, t ( qˆ − qˆ ) + β ( qˆ − qˆ ) [ T NT * ki, t ] + β5ki , t + γ i i t ˆ = ˆ ˆ μ (15) Germany p i, t β 0 + β1 pT , i, t + β2ei , t + β3 T NT i, t 4 + i, t , We estimate a standard fixed effect least square dummy variable (LSDV) estimator with robust standard errors. Panel unit-root tests based on Im/Pesaran/Shin 2003, Maddala/Wu 1999 and Choi 2001 do reject non-stationarity of the levels of our time series. Only for the financial account balance, the Im-Pesaran-Shin test cannot (although only slightly) reject the null of an individual unit root (see Table 1). Therefore, the results concerning the financial account have to be treated with caution. 12 BIS data of consolidated foreign claims of European commercial banks against banks in Central and Eastern Europe. 13 Interaction terms are product terms of the independent variable ( q ˆ ) (focal variable) and the second T − qˆ NT i, t independent variable k ˆ (moderator variable) (Jaccard/Turrisi 2003). The coefficient i, t β 3 captures the effect of ( q ˆ ) on when . The parameter T − qˆ NT pˆ i, t i, t kˆ i, t = 0 β 5 estimates the effect of k ˆ on when i, t pˆ i, t ( q ˆ − ˆ . The coefficient of the interaction term, T q NT ) = 0 β i, t 4, indicates the number of units that β 3 increases if k ˆ grows by one unit. The alternative explanation is that: β i, t 4 indicates the number of units that β 5 increases/decreases if ( qˆ − q ˆ T NT ) grows by one unit. However, we focus on the interpretation above which is i, t in line with our model that capital inflows drive productivity growth. - 19 -
Table 1 - Panel unit root tests for the inflation differential and its potentially forcing variables (1993-2008) Im/Pesaran/ Shin Panel Unit Root Test ADF-Fisher chi-square PP-Fisher chisquare Inflation 0.000 0.000 0.000 Wage growth 0.000 0.000 0.000 Export price inflation 0.000 0.000 0.000 (Germany) Δ Exchange rate 0.000 0.000 0.000 Relative productivity growth 0.037 0.018 0.000 Financial account balance 0.157 0.033 0.000 (-1) Current account balance 0.001 0.003 0.001 Δ Real interest rates 0.000 0.000 0.000 (domestic) Δ Reserves of monetary authority 0.000 0.000 0.000 Money growth 0.000 0.000 0.000 (money+quasi money) Δ Foreign liabilities of banks 0.000 0.000 0.000 (BIS Data) Note: Lag selection has been conducted using the modified Hannan-Quinn criterion, allowing for an individual intercept. 14 Entries are p-values. 4.2. Estimation Results Table 2 displays the results for LSDV estimations using productivity difference as relative productivity growth as formulated in the Balassa-Samuelson model. The evidence in favor of the seminal Balassa-Samuelson effect as formulated in equation (8) turns out to be weak. The estimated coefficients of export price inflation ( β 1 ) and of the nominal exchange rate ( β 2 ) display the expected sign and are statistically significant at the common significance levels. However, the coefficients are larger/smaller than unity, indicating more than complete / incomplete pass-through from foreign export prices and exchange rates to domestic prices. This is in line with a recent paper by María-Dolores (2009). In a second step, we add the different proxies for capital inflows and the interaction term. The impact of the German export prices and exchange rates on domestic inflation in Central and Eastern Europe remains 14 A variation of the lag selection criteria as well as estimating the regression equation without intercept and trend or without trend does not change the results significantly. - 20 -
Page 1 and 2: Deutsches Institut für Wirtschafts
Page 3: Real Convergence, Capital Flows, an
Page 6 and 7: process, the credit boom in some Ce
Page 8 and 9: first derivation, changes 3 in the
Page 10 and 11: a higher supply of capital at a sub
Page 12 and 13: Assuming for simplicity that the pr
Page 14 and 15: the seminal Balassa-Samuelson model
Page 16 and 17: in today’s liberalized internatio
Page 18 and 19: Such boom-and-bust cycles in emergi
Page 20 and 21: Figure 6 - Cyclical deviation of th
Page 24 and 25: obust, but the proxies for capital
Page 26 and 27: expected sign but not equal to unit
Page 28 and 29: Table 6 - Determinants of CEEC infl
Page 30 and 31: Égert, Balász / Podpiera, Jirí 2
Page 32: Annex Derivation of Equation 9 We a

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